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3. BP-10-09

Form BP 10 09: Named Perils Endorsement for Businessowners Policy

What the form is:

The BP 10 09 Named Perils endorsement modifies Section I – Property in the standard Businessowners Coverage Form (BP 00 03). Its primary purpose is to change the property coverage from an "open perils" (or "special form") basis to a "named perils" basis. This means that instead of covering all risks of direct physical loss except those specifically excluded, the policy with this endorsement will only cover losses caused by the perils specifically listed in the endorsement. The typically listed perils include fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic action, and transportation.

Classes of business it applies to:

This endorsement is generally considered for businesses that may not require or cannot afford the broader coverage of an open perils policy. It might be suitable for:

• Budget-conscious small businesses: Businesses seeking a more affordable property insurance option, understanding that they are accepting a more limited scope of coverage.
• Businesses with lower property risk profiles: Operations where the likelihood of loss from unlisted perils is considered minimal. For example, a small office-based business with limited inventory or specialized equipment.
• Specific landlord scenarios: Landlords who are primarily concerned about major events like fire or windstorm and are willing to self-insure or manage other types of property damage.
• Micro-businesses: ISO's Micro-Businessowners Policy (BP 00 04) itself provides coverage on a named perils basis similar to this endorsement, suggesting its suitability for very small enterprises, including some home-based businesses with minimal property exposures.
• Businesses in certain geographic areas or industries: In some cases, underwriters might prefer or only offer named perils coverage for businesses in areas prone to specific, unlisted catastrophe risks (unless those risks are specifically bought back via other endorsements) or for industries with unique exposures not well-suited to standard open perils coverage.

Special considerations:

There are several important points to consider when evaluating or using the BP 10 09 endorsement:

• Burden of Proof: Under a named perils policy, the burden of proof typically falls on the insured to demonstrate that the loss was caused by one of the listed perils. This is a key difference from an open perils policy, where the insurer must prove an exclusion applies to deny coverage.
• Coverage Gaps: By definition, any peril not explicitly listed is not covered. This can leave significant gaps. For example, common perils like theft (other than building damage caused by burglars), water damage from sources other than sprinkler leakage (unless the pipe burst was caused by a listed peril), or accidental damage not fitting a named peril would generally be excluded. The 07 13 edition of the BP 10 09 deletes references to breakage of building glass, water damage, and theft or attempted theft as covered causes of loss because these are not broadly covered when the endorsement is attached.
• Cost vs. Coverage: While a named perils policy usually has a lower premium than an open perils policy, this comes at the cost of reduced coverage. Businesses must carefully weigh the premium savings against the potential for an uncovered loss.
• Policy Comparison: It is crucial to compare the list of named perils in the BP 10 09 with the exclusions in an unendorsed BP 00 03 (special form) to fully understand the differences in coverage.
• Modifications to Property Not Covered: The BP 10 09 07 13 endorsement replaces the "Money or Securities" section under "Property Not Covered". Bullion is excluded except as provided by the Burglary and Robbery optional coverage. Money and securities are also excluded except as provided by the optional coverages for Money and Securities and Burglary and Robbery.
• Vegetated Roofs: The 07 13 edition of BP 10 09 includes a limitation stating that vegetation which is part of a vegetated roof is not covered with respect to certain perils.
• Vacancy: If a building has been vacant for 60 or more consecutive days before a loss, the amount paid for loss or damage caused by any covered peril (other than those already excluded due to vacancy in the base form, like vandalism or sprinkler leakage if the system wasn't protected) is reduced by 15%. The BP 10 09 removes some specific causes of loss (like building glass breakage, water damage, theft) from the vacancy provision because they aren't covered by this endorsement in the first place.

Key information for agents and underwriters:

• Pricing: The use of BP 10 09 typically results in a lower premium compared to the standard open perils BP 00 03, reflecting the reduced scope of coverage. Underwriters will assess the specific perils being covered and the exposure of the business to those perils.
• Risk Assessment: Underwriters need to carefully evaluate if the named perils coverage is appropriate for the specific risk. Businesses with higher susceptibility to perils not listed (e.g., certain types of water damage, theft of business personal property beyond building damage during burglary) might be poor candidates for this endorsement unless those exposures are minimal or addressed elsewhere. The decision to offer this endorsement often involves considering the business's overall risk management practices.
• Coverage Gaps and E&O: Agents have a critical role in explaining the limitations of named perils coverage to clients. Failure to adequately disclose the coverage gaps could lead to errors and omissions (E&O) claims if an uncovered loss occurs. It's crucial for the insured to understand what is not covered.
• Underwriting Guidelines: Insurers will have specific underwriting guidelines dictating when the BP 10 09 can be used. This may depend on the class of business, loss history, location, and the condition and maintenance of the property. For example, a property with a history of water damage claims (other than sprinkler leakage) might be a candidate for named perils if the underwriter is trying to limit future water damage exposure.
• Alternative to Declination or Higher Deductibles: For some risks that are borderline acceptable for an open perils policy, an underwriter might offer a named perils form as an alternative to declining coverage altogether or imposing very high deductibles for certain perils.
• Comparison with Basic and Broad Forms: The perils listed in BP 10 09 are similar to those found in "basic form" commercial property policies. It provides more limited coverage than a "broad form," which typically adds a few more named perils like falling objects and weight of snow, ice, or sleet. The BP 10 09 essentially converts the BOP's special form coverage to a more basic level of protection.